Spousal Support - Maintenance

Scott Baroway Mediation Partners 720-889-2808Baroway@gmail.com

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Maintenance

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State law A payment, other than equitable distribution

or child support, to a former spouseEnds upon death of former spouseMay ends upon remarriage and/or

cohabitation depending on agreementFederal tax law

Different requirements than under state lawImportant because of tax consequences

Colorado Maintenance Law (C.R.S. 14-110-114)

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Permanent/Long Term May Be Awarded ONLY IF:

Lacks sufficient property to provide for reasonable needs, ANDIs unable to support self through appropriate

employment, OR Is custodian of child whose condition or

circumstances prevent employment outside of home

Definitions

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“Reasonable Needs” – depends on particular facts and circumstances of parties marriage.

“Appropriate Employment”- depends on parties economic circumstances and reasonable expectations established during the marriage.

Statutory Maintenance Factors

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1. Actual need and ability to pay (financial resources avail)

2. Length of the marriage3. Age, physical and emotional health of parties4. Standard of living during the marriage5. Earning capacities, educational levels, vocational

skills and employability 6. Ability of paying spouse to meet own needs while

paying maintenance7. Parental responsibilities for children8. Time and expense to acquire education and training

to enable party to find appropriate employment.

Other Maintenance Factors

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9. Tax Effects

10. Present Circumstances are controlling rather than historical

11. However historical may be consider to impute income

12. Duration of Maintenance Award1. Continuing or for definite period of time2. Incremental reductions ok if basis3. Expectation of retirement benefits ok to reduce 4. Improper speculation about future NOT allowed

10. Any other factors which the court may deem relevant

The Practical Problems In Determining Maintenance

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No formula approach like child support or “rules of thumb” Except “temporary maintenance”

“Standards” have little place in the law of domestic relations

The law grants judges great discretion – rarely overturned on appeal

Maintenance Issues

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Permanent vs. TemporaryRehabilitative v.

ReimbursementRetirementCohabitation / RemarriageChanges CircumstancesTaxability

Pre-Decred Maintenance(C.R.S. 14-110-114(2))

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Combined Annual Income < $75,000/yrRebuttable Presumption for pre-decree

supportCalculation

(40% of higher earners gross income –50% of lower earners gross income)

“Courts shall deviate if “inequitable or unjust”TEMPORARY MAINTENANCE ONLY

“Income” defined

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From every source (Same as Child Support)Salaries, wages, tips (all), commissions, indep

contractor payments, bonuses, dividends, severance, pensions, royalties, rents, interest, trust income, annuities, capital gains, moneys from self employment for personal use, social security, workers comp, unemployment, disability, PI case, monetary gifts, prizes, ptsp distributions, reimbursed expenses from work if significant and reduce personal living expenses, alimony received, overtime if required by employer

Self Employment – Income after “ordinary business expenses” – must be real business expense

Lots of Rules and tests here – but no clear line to follow

Subtract maintenance or support paid to prior marriage or children if through court order.

Not Income

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Child Support ReceivedMeans tested assistance – SSI, food

stamps, Colorado Work ProgramsIncome from additional jobs from 40+ week

employment

Pre-decree Maintenance Example

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Spouse A Spouse B5000/mo 2400/mo40% = $2000/mo 50% = $1200/mo

$2000 – $1200 = $800/mo – presumptive Temporary award

Permanent Maintenance

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Awarded in long term marriagesLong term marriages can be as short as

10 yearsTypically 10-15 year marriages in the gray zoneVery fact dependent

Permanent alimony can end/be modifiedSubstantial change of circumstances, e.g.,

retirement, disability of either party

Cohabitation

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Depends on terms of agreementRemarriage ends permanent and

limited duration alimonyCohabitation not sufficient by itself to

reduce Depends on facts

How close to marriageHow much support provided

Tax Considerations

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Alimony is deductible from income for the paying spouse and taxable to receiving spouse

Requirements areWritten divorce or separation instrumentSpouses cannot live together after divorceCash (or cash equivalents)Marriage relationshipMust file separate tax returnsMust terminate at deathMust not be child support

May be deemed child support if terminates or reduces as a result of a child contingencye.g., reduction of alimony on child’s 18th birthday

Review by tax professional may be warranted

Alimony Recapture–IRC 71(f)

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Intended to prevent front loading of maintenance OR conversion of property settlement payments into deductible alimony.

If Alimony decreases or terminates during first three calendar years, some recapture (loss of deduction) – talk to accountant.